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Marc S. Pelletier, P.C., CPA's
666 Main Street, PO Box 326, Southington, CT 06489
Phone: 860-620-5500
If you sell your home and don’t buy another one, and you make a large profit on the sale, you could owe federal capital gains taxes on your profit.
In some high-priced real estate areas, you can easily exceed these exclusions if you’ve owned a home for a while. If you kept good records, you should be able to deduct selling and purchasing costs, including commissions and fees, from taxable gains, even if the latter occurred years ago.
You can also use capital improvements made to your home, including a deck, a room addition or a garage, to subtract from your gross gain. This, according to the IRS, will result in an adjusted basis, which is typically your cost in acquiring your home plus the cost of capital improvements, less casualty loss amounts and other decreases.
While these taxes may surprise you, take solace knowing that they will also increase the adjusted cost basis on the home you just sold. Talk to your tax professional for more information.
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